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November 27, 2012

Job Search Tax Deductions Update for 2012

When don’t you think about taxes, money and related financial issues? It seems to dominate the thought-process of just about everyone especially at this time of year. In 2013 it may be called the year of debt and taxes before we know it. Add the volatility from the economic and political cycles to your career and wham, you have a lot to think about. During your career, life or in a major transition of any kind these issues seem to amplify worry even among the seemingly strongest of us all. Bills never seem to slow down during any kind of a career transition. Well, they never slow down no matter what! During  transition, this can increase stress and decrease the open-minded, positive focus one needs to successfully search for and find not just the next best job but the next best career life opportunity. So wherever you are and if you are in career transition let’s start with good news.

Let’s start with the basics. Make sure if you are in a career transition you track every expense you have so that you have records and yes, I said records for the costs of this work and it is work, isn’t it? If you are looking for a job in a career related to what you have done many of your expenses are deductible including the costs around career coaching, career counseling and resume writing. You don’t even have to be out of work to have some of these costs qualify but only those expenses that are over 2% can be used. According to the IRS, you may deduct selected expenses if you are looking for a job in your present occupation but you may not deduct those same expenses if you are going from a Vice President of Sales in consumer products to an Emergency Medical Technician. Also note that there must not be a substantial break between the end of your last job and the time you are focusing on finding a new job. Lastly if you are a new graduate you or are looking for a job for the first time the allowances are not there for you to deduct expenses.

Here are some notes from the latest IRS publication on the subject:

Employment and Outplacement Agency Fees
You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. However, if, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Also, If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. pays you back. If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. See Recoveries in Publication 525.

Employer pays the employment agency. If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income.

Resume
You can deduct amounts you spend for preparing and mailing copies of a re ́sume ́ to prospective employers if you are looking for a new job in your present occupation.

Travel and transportation expenses
If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is impor- tant in determining whether the trip is primarily personal or is primarily to look for a new job. Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. You can choose to use the standard mileage rate to figure your car expenses. The 2011 rate for business use of a vehicle is 51 cents per mile (55.5 cents per mile after June 30, 2011). See Publication 463 for more information on travel and car expenses.

Legal Fees
You can deduct legal fees related to doing or keeping your job.

Over the holiday season and if you are looking for a job you will find many a platoon of well-meaning friends lining up at seasonal events or holiday parties to share mostly anecdotal, unqualified advice on a number of matters, including taxes and job search. Let me just share some with you as it pertains to career transition issues. Volumes of this kind of advice may be available if you just listen. Be careful of asking for advice you might get it. So let’s go over some general rules as they relate specifically to career transition, job search and tax rules. For more information I recommend consulting with your accountant, CPA, qualified tax adviser, and always plan in advance.

You may be surprised. The federal government does help jobseekers in several ways. Look closely at job search expenses, including childcare, moving, health care and don’t forget education. Clear record keeping and detailed notes will help.

What do I need to know and keep in mind? First, remember that laws change; however, here is some general advice. It is not mandatory that you are unemployed or employed to deduct expenses.

Disclaimer: This article is meant to provide general information and an overview not legal or financial advice. For specific guidance please consult directly with the IRS and IRA publications and representatives, your tax and financial advisors.

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2 Responses to “Job Search Tax Deductions Update for 2012”

  1. March 01, 2013 at 6:26 pm, DJ said:

    Since job search expenses go directly to 1040-Schedule A, and do not go on form 2106, then do you have to reduce the job search travel meal expense by 50%? Where are IRS published specific instructions concerning this question.

  2. March 21, 2013 at 2:37 pm, Career Pro Inc. said:

    Wow. That’s a great question. I can only answer it by saying that you should check with a CPA. It will be a question that I will look into an expert for the next installment of this article.

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